Grains set to react to high-volatility moves

Corn: A follow-through Monday was fully expected. Just about anytime we see a limit move from a report, we can expect to see some continued buying on the following day. It will most likely be Tuesday before trade turns direct focus away from the report and asks “what now?”

Old crop should be given a green light for buying at least until the next supply/demand report on April 10. Trade saw smaller stocks on hand Friday, and now we wait to see if that means lower stocks estimated for the end of the year. During the next week, trade will assume that 140 million fewer bushels than expected, as of March 1, instantly means 140 million off end-of-year Aug. 31 numbers as well. There is no real argument with this thought except that last year the USDA did not do that. They took off the current stocks but left ending stocks alone on the April report. This is why we say that for now there is a green light of buying but this market still needs the April 10 report to confirm that thought.

New crop corn was not given any new positive news Monday but followed beans higher anyway. With beans priced as such a high level now compared to corn, there should be enough acres-switching talk that will allow for December corn to continue slowly following. Monday's planting pace estimate was 3% complete. If corn can continue planting at a fast pace, December will always have heavy resistance on it no matter what outside influences are…Ryan Ettner

Soybeans: Follow-through buying pushed beans higher once again. Old crop was up about 18 cents with new crop jumping 27 cents. The trade is still focusing on USDA dropping quarterly March 1 stocks and that they will have to make adjustments to ending stocks Aug. 31 next Friday (4/9).

We feel that we could see ending stocks tighten up from last month’s 275 million down to 236 million. That is a reduction of 39 million bushels. New crop continues to gain on old crop due to the idea that we will have tighter stock now that will have to carryover to less acres this year.

Demand also plays a big role in this rally. We have not had exports drop off like we typically see this time of year. China bought US old crop soybeans again on Monday. Because U.S. grain is still cheaper, we may be able to scrounge a few more sales in the short term. In three weeks, when harvested crop makes its way to the ports, that may change.

The trend is still up and we could still see lower prices supported until we see a change in exports or until we see the charts roll over. We are not seeing that yet…Steve Georgy

Wheat: Ramifications of Friday’s USDA report continued to affect the wheat market on Monday. This led to the Minneapolis contract closing higher on the session while both the Chicago and KC markets were lower.

The Minneapolis market rally is being driven by the USDA’s surprising spring acreage estimate from Friday. The acreage report showed spring wheat acres coming in at a surprisingly low 11.976 million acres. The trade had anticipated the number to be at 13.3 million. The market is now trying to ration demand for the spring wheat or convince the farmer to abandon his plans to plant corn or soybeans and plant wheat instead. The Minneapolis wheat contract should be supported until at least one or both of objectives area reached.

The Chicago and KC markets were weaker on anticipation of bearish crop ratings report that was to be released after the close. With the unseasonably warm weather we have been seeing, the crop is advancing at a ferocious rate. This sets the crop up to look pretty good coming out of dormancy. The report showed that the crop is doing quite well with 58% of the winter wheat crop was rated good to excellent. This was up from the last the fall's last estimate of 52%. Spring wheat planting progress was off to a good start as well as 8% of the crop is planted. This compares to 1% planted at this time last year and 2% on average for this time of year.

As for the weather forecast, there is some “cooler” weather in the forecast for late next week with overnight lows slipping into the 30’s. At this time, temps are not projected to fall low enough to cause damage but we need to keep an eye on the forecast. It is out far enough that the maps could change dramatically.

Without any major production loses, Allendale is anticipating second highest carry out of wheat for the U.S. in the past 10 years. We are anticipating world stocks to be at record levels at the end of this production year. With this in mind we would recommend hedgers to take advantage of rallies to hedge/sell inventory. For traders who want to own wheat, we would recommend using low risk options and not chase rallies…Jim McCormick

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com